TOKYO — In by far the most aggressive move by a foreign firm to exploit the newly opened Japanese financial markets, giant U.S. brokerage Merrill Lynch & Co. revealed a major bid Thursday to capture some of the $10 trillion held by Japan's individual investors.
Merrill Lynch unveiled plans to hire about 2,000 employees from recently bankrupted Yamaichi Securities Co. and open 31 local offices across Japan. Most outlets will be in former branches of Yamaichi, a 100-year-old firm that had been Japan's fourth-largest brokerage.
The financial deregulation of Japan has long been seen as a big opportunity for foreign firms. The massive holdings of Japanese stocks, bonds and bank deposits by individual citizens have generally performed very poorly during the 1990s. Postal savings accounts, for example, pay less than 0.5% interest for multiyear deposits, yet are extremely popular.
Merrill Lynch's move puts it far in the lead among foreign brokerage firms seeking to manage a share of the multitrillion-dollar cache held by Japan's legendary savers.
No one thinks that traditionally cautious Japanese investors are going to send a large portion of their savings abroad. But household wealth here is so huge that even a small percentage of it means big money.
"Ordinary people like me who have only gone overseas for travel and who don't speak English will not think of investing overseas," said Yikie Goto, 39, an architect. "I don't think there will be a sweeping fad of everyone investing in foreign products. People will not be easily persuaded by salesmen to invest overseas because they think such investments aren't safe."
The collapse of Japan's stock and real estate "bubble" of the late 1980s taught ordinary Japanese a lesson they haven't forgotten, which reinforces the preference of many people for such investments as post office savings accounts, Goto explained.
Expansion here by foreign brokerages is possible partly because foreign currency controls are due to be relaxed April 1 as part of a five-year program of financial reforms being promoted by Prime Minister Ryutaro Hashimoto.
Dubbed the "Big Bang," the reforms aim to make Japan's financial markets more open and competitive, with the goal of strengthening Japan's financial industry and putting the country's immense wealth to better use in preparation for the aging of Japanese society in the 21st century. Allowing freer competition from foreign brokerages is seen as a key element of the plan.
Winthrop Smith, chairman of Merrill Lynch International, said at a Tokyo news conference that a new firm, to be named Merrill Lynch Japan Securities Co., will sell Japanese and foreign equities and bonds and also offer services such as investment trusts, which are Japan's version of mutual funds.
"One key to the success of this new company will be our ability to attract talented former employees of Yamaichi Securities Co.," Smith said. "We look forward to offering employment opportunities to as many people as possible, consistent with our plan to grow the business carefully."
Yamaichi collapsed in November after disclosing $2.2 billion in hidden losses, and its 7,500 employees will lose their jobs once the firm completes its closure. Merrill Lynch is inviting them to apply for jobs, and those it hires will not only receive their former salaries but also receive merit-based benefits, Smith said.
Merrill Lynch will take over Yamaichi's leases on about 30 of its former branches, Smith said. The U.S. firm said it aims for its new Japanese subsidiary to have $20 billion in assets under management by 2000, at which point the operation should be profitable. The new firm will be capitalized at between $200 million and $300 million, Smith said.
Despite her skepticism about foreign investments, architect Goto said that if she and her husband did have a lot of money to invest--$400,000 or so--then she might consider putting one-third of it into foreign assets.
Chiaki Kitada of The Times' Tokyo bureau contributed to this report.